Is the Trump administration affecting Australian back pockets?
When Donald Trump became the 45th President of the United States and leader of the free world on 20 January 2017, many global citizens held their collective breath as we all waited to see what impact the Don would have on the world we live in.
Never before has an American president divided the country and the world as much as Trump and whether you view him as the Merchant of Menace or a Tangerine Tornado, his impact on the US economy was immediate. Since the presidential election, the Dow Jones industrial average has gained almost 13%, topping 21,000 at one point, and the S&P 500 has advanced by 10% but some sectors have gained much more1.
Closer to home, the Australian Dollar improved against the Greenback when Trump stepped into the big shoes but has been on a roller coaster ever since and has fallen to a one month low following the missile strike on Syria2.
In a broad sense, we’re not yet seeing any real impacts to the Australian economy and more importantly our individual back pockets, but if the US President keeps his election promises that has the potential to change in the future.
The Don has been very vocal about protecting American businesses and that could spell bad news for Australia’s agricultural sector. According to abc.net.au3, for the first time in a decade farming (together with fisheries and forestry) has overtaken mining as the biggest single contributor to national economic growth. In dollar terms, at $63.8 billion, farm production has never been worth more, and Australian farm exports are tipped to hit a new record of $48.7 billion in 2017. But the US exit from the Trans-Pacific Partnership means increased uncertainty about the American export market, and for now, there is little Australian exporters can do but wait and see.
We’re still in the very early stages of Donald Trump’s presidency, but he’s certainly already made announcements that aren’t likely to be positive news for our economy. He has indicated he would like the US Federal Reserve to raise interest rates4, and if this happens our own Reserve Bank is likely to follow suit. Increased interest rates will put pressure on Australian families already battling to keep their heads above water. Even if you rent your property, increased interest rates usually means higher mortgage repayments for investors and this is likely to result in a rent hike at some point.
On the flip side, Trump’s single mindedness about making America great again has seen a new deal forged with Lockheed Martin for the purchase of F-35 fighter jets and Australia stands to save hundreds of millions of dollars on our strike fighters that have been ordered but are not yet under contract5.
So will we experience a Trump Bump or a Trump Slump? Only time will tell but one thing’s for sure - when the Donald says Trump, others ask how high.
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Sources:
1 Thinkadvisor.com – Trump’s Policies: Market Impact vs. Economic Impact
2 Reserve Bank data
3 Trade in Trumpworld: Will US President keep his promises and what does it mean for Australia if he does?
4 Propertyupdate.com.au – Trump’s Policies affect Australian Property Investment
5 The Australian – Donald Trump’s attack on US jet costs to save us multi-millions